Us Recession free essay sample

Since the start of the recession, the United States has tried to regain stability in its economy, and implement fiscal and monetary polices to prevent future crisis. One of the indictors of a recession is the unemployment rate. The most recent recession was preceded by a time of steady economic growth, which was accompanied by employment growth. Prerecession unemployment rate hovered around 4-5%, which is historically and relatively low. Job growth was concentrated in three areas: education, health-care and housing related job. While education and health-care have been on a steady incline for years, the then booming housing market created most of the jobs in the housing industries. In December 2007, at the start of the recession the unemployment remained around 5 percent. By the end of the recession in 2009, that number had climbed to 9. 5% and some states 10%. In September 2008, the economic downturn intensified when the economy was jolted by trouble in the nations finical system. We will write a custom essay sample on Us Recession or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page In the aftermath of the turmoil, credit market constricted and banks tightened lending standers. The recession rapidly deepened and job losses spiked. The monthly job loses averaged 712,00 from October 2008 through March 2008. Historically, good producing industries experienced the largest decline in employment during a recession. The most recent recession followed suit, as manufacturing and constriction where of the hardest hit industries. The recession led not only to employment losses, but also cuts in workers hours. Despite the improvements in 2010, employment remains 7. 7 million jobs below prerecession mark. In the U. S. GDP fell in the fourth quarter of 2008, by 6. % annual rate, with declines heaviest in business investment, exports, finance, autos, housing, construction, and retail sales. American business slashed capital investment at an annual rate of -38%. Investment in software and computer equipment declined by 33. 8%, and investment in new buildings was down 44. 2%. Total investment expenditure is in free fall as of the first quarter of 2009, dropping by roughly 5 0%. While consumer spending doesn’t usually precipitate a recession, since it represents seventy percent of total spending, and spending drives the economy in the short term, consumption plays a key role in the duration of recessions. Total Personal Consumption Expenditures began falling in the third quarter of 2008 with a -3. 8% change which worsened to a -4. 3% change in the fourth quarter. Looking at the components of consumption reveals that the majority of the decline occurred in durable goods which turned negative in the first quarter of 2008 and snowballed to -22. 1% in the fourth quarter of 2008. The decline in durable goods likely coincides with the slide in spending on houses. When people stop buying new homes, they also spend less on appliances, home furnishings, etc. Non-durable Consumption has also declined beginning in the third quarter of 2008 with a -7. % change and continuing into the fourth quarter at -9. 4%. Non-durable consumption is largely a function of income. As GDP declined beginning in the third quarter of 2008, personal disposable income fell sharply, bringing down non durable consumption for the next several quarters. The final component of consumption, Services, while dipping slightly negative in the third quarter of 2008 at -0. 1% turned positive again in the fourth quarter of 2008 resting at 1. 5%. Even a small negative decline in services is a matter of concern as this area of consumption is generally the most resilient to economic downturns. One hopeful sign of recovery is that in the first quarter 2009, total consumer spending increased, driven in large part by 9. 6% growth in consumer durable spending. Despite the severe decline in the housing market, the US economy was kept afloat for nearly three years by growth in exports. During the period from the fourth quarter of 2005 to the second quarter of 2008, export growth averaged nearly 10% at an annualized rate. It was this growth that gave hope during late 2007 and early 2008 that the economy might yet dodge a recession. However as the recession became a global phenomenon, the world demand for American exports waned. In the third quarter of 2008, export growth slowed before dropping 23. 6% in the fourth quarter. This drop accelerated in the first quarter of 2008, with another 28. 7% decrease. US government spending has not played a large role in the current recession to date. State amp; local spending has declined as expected, likely a by-product of weakening tax revenues, especially in states that must keep a balanced budget. The net effect has been modest with total government spending growth averaging 2. 7%. A substantial decline in federal defense spending in the first quarter of 2009 caused a noticeable 3. 5% decline in total government spending.